The tax cut that wasn't: Dems back tax expenditures

Bedford Republican Andy Sanborn often says that his main motivation every day in the state Senate is to cut taxes.

His Democratic colleagues have spent every day fighting Sanborn's efforts to ramp down New Hampshire's business tax rates.

So it might have seemed "off" last week to see Sanborn and his fellow Republicans on the Senate Ways and Means Committee voting against bills to cut taxes while Democrats were arguing for them.

The key to understanding this reversal is that the bills in question were not really tax cuts. They were tax expenditures; the deductions, credits, and gimmicks politicians use to build special preferences into the state's tax code.

Over the past several years, Republicans have taken the Business Profits Tax and Business Enterprise Tax down several steps, while business tax revenues have climbed.

This broad approach to tax reform is working, and New Hampshire businesses have more money to use on lower prices, higher wages, and higher profits. These are all good things.

The Democratic approach would be to keep tax rates high, but carve out ways for taxpayers to avoid them. SB 75 would give tax credits for donations to career and technical education centers.

SB 173 would let the New Hampshire High Tech Council hand out tax credits for businesses that recruit high-tech workers.

SB 76 would let businesses collect their research and development tax rebates up front, before the taxes were even due.

We like it when businesses support New Hampshire technical schools. We like recruiting high-tech workers.

We like corporate R&D. So why not build incentives into the tax code for all these good things?

Because even well-meaning politicians lack the capability to plan the state's economy from Concord.

Less well-meaning politicians can use the shortcuts they build into the maze of taxes and regulations to support their friends and supporters.

Such micromanagement would surely benefit some companies, and provide endless work for lawyers, accountants, and lobbyists.

But it would also make New Hampshire's business taxes more complicated and expensive for everyone else.